BendBroadband: Local dog to get new master

Video: Inside the BendBroadband Vault, one of the assets to be acquired in the sale

By Rachael Rees / The Bulletin

Published May 11, 2014 at 12:01AM

• After building BendBroadband into a nationally recognized cable TV and Internet provider, Amy Tykeson decided to sell her family-owned company, to give it opportunities for growth.

Tykeson, who has voiced her opinions about federal telecommunications law before a U.S. House subcommittee and has been inducted into the Cable Hall of Fame, announced the sale of BendBroadband on May 1 to Chicago-based Telephone and Data Systems Inc., the parent company of U.S. Cellular.

Both Tykeson and officials with Telephone and Data Systems say BendBroadband customers should expect no changes. But for Tykeson, the company’s president and CEO, the sale will be a major milestone in a cable-industry career that began with a job at Home Box Office at age 23 and has continued for more than 30 years.

“My plan is to take a break and catch my breath, staying in Bend and looking for other ways that I can continue and make a difference,” she said.

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Ryan Brennecke / The Bulletin

The entrance of the Vault, BendBroadband’s data center and one of the businesses being sold to Telephone and Data Systems.

The cable industry, Tykeson said, has played a large role in her life and that of her family.

“Together we’ve watched the cable industry grow in ways we couldn’t image,” she said, referring to her father and company vice chairman, Don Tykeson, who’s been in the cable business more than 50 years. “I think we’ve had a hand in guiding that growth.”

But with growth comes change, and, Tykeson said, the sale to TDS, expected to close by the third quarter, will give BendBroadband customers and employees more opportunities.

The sale of BendBroadband and its affiliates, the Vault data center and Zolo Media, is taking place at a time of major industry consolidation, which companies say allows them to accelerate innovations.

In February, Comcast and Time Warner Cable — leaders in video, high-speed Internet and phone service — announced plans to merge in a stock-for-stock transaction valued at approximately $45.2 billion. The merger, which critics have said will create a company with 40-60 percent of the nation’s wired broadband subscribers, is pending approval from the U.S. Department of Justice and the Federal Communications Commission.

Industry consolidation has been ongoing since 2005, not just in the cable industry, but across the board, said Stephanie Senner, director of B2B Marketing for BendBroadband.

“There’s a lot of market forces in play that are causing companies to join together,” she said. “It’s everything from the tremendous expense of providing service, to the increased expectations for personalized service.”

Senner said the challenge is how to provide the same level of service to customers in a cost-effective way that’s affordable for the company and customers.

Being part of a larger-scale company, Tykeson said, will have benefits.

“You have more buying power,” she said. “You can get access to better technology. You can be more efficient, so you can run your operation more smoothly, which helps save costs and mitigate the costs we’re all facing for programming, insurance and medical. That’s really the business cycle we’re in right now; it is one of consolidation.”

Two years ago, Petersen said, TDS decided to invest in cable companies. And in February 2013, it purchased its first — New Mexico-based Baja Broadband.

“The cable business is a growth business for us,” Petersen said. “We’d like to (buy) one or two more of these in the future so we have almost an equal-sized cable-broadband business as we do our existing telecommunications business.”

Petersen said the company has acquired well over 120 telecommunications companies, which are predominately small, rural and suburban operations.

“We’ve built a portfolio of acquisition for the past four decades, and we haven’t sold any of these companies,” he said.

Telephone and Data Systems looks at well established cable companies with high-quality networks that maintain a good corporate reputation.

In the last five years, the company has paid $525.9 million to acquire a cable business, five information technology businesses and one phone company, according to its 2013 annual report. The purchase of BendBroadband will cost Telephone and Data Systems $261 million.

Despite its size, Petersen said, Telephone and Data Systems’ goal is to still give customers a local experience.

“We think BendBroadband has a very established brand,” he said. “They’re a huge community investor. They’ve built trust with the community that we don’t want to dilute.”

Tykeson said negotiations with Telephone and Data Systems had been in the works for several months. She added that BendBroadband turned down other suitors, choosing Telephone and Data Systems because the company shares BendBroadband’s values, vision and history.

“TDS loves our brand,” she said. “They love our local dog and what we have built here. It makes me proud that that will continue.”

Garry Benson, a resident of Carlsbad, N.M., said he’s seen minimal impact to his service since Telephone and Data Systems took over Baja Broadband.

Benson said one TV channel completely disappeared from his package, but other than that, there’s been no changes with his cable, phone or Internet services. Prices and the phone number he calls for customer service haven’t changed, he said.

“Everything has worked just the same as it always has before they bought it,” Benson said.

“I’m not sure how we feel yet because we haven’t seen if anything is going to change or not,” he said. “I’m a little bit cautious, keeping an eye on whether or not service level or pricing changes.”

Even if Telephone and Data Systems keeps BendBroadband’s local dog slogan, Gray said, “local” won’t have the same connotation.

“From the service standpoint, I still feel like it’s local, but definitely not the money flow. It’s a little bit disappointing.”

Others share Gray’s reluctance. Comments on BendBroadband’s blog include a fear of price hikes and disengagement from the local community, citing past sales of major local companies like Mt. Bachelor to Utah-based Powdr Corp. and Columbia Aircraft Manufacturing Corp. to Cessna.

But others believe the sale is necessary to remain competitive as bigger cable and tech players come to the region.

Gray said he’s personally used BendBroadband’s services for more than a decade, and his business completed a move into the Vault this month.

He chose to house his company’s servers in the Vault for its security, the different bandwidth providers available, its energy efficiency and because it is local.

Gray said he hopes the services will remain the same and the acquisition will result in new technology offerings such as more bandwidth providers and partnerships with other data centers that will benefit Smart Solutions.

Petersen, of Telephone and Data Systems, said the Vault is an important part of the acquisition that will add to the data center business the company has been investing in over the last four years.

It’s expected that the Vault will fit into OneNeck IT Services, which operates six data centers in the U.S. and is building a seventh, he said.

“The Central Oregon location will help us quickly establish a presence in the West and complement the newly announced construction of our Tier 3 center in the Denver area,” he wrote in an email.

Tykeson said data centers like the Vault are rising in importance and are the wave of the future.

“Data is really a part of every business now, not just companies that are in technology,” she said.

As more people move their sensitive data into the cloud, Petersen said, Telephone and Data Systems wants to sell a full portfolio of services, including cloud computing and disaster recovery services.

The Vault is currently at about 40 percent capacity, with an additional 6,500 square feet and a neighboring lot that could be developed into a future data center.

“With data centers, you hope to fill out with commercial customer capacity to 75 percent, then think about expansion,” Petersen wrote in an email. “Having an additional lot adjacent to the Vault today allows for efficient expansion, and that’s something we are thrilled to have an option on.”

—Reporter: 541-617-7818,

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BendBroadband

63090 Sherman Road, Bend

280 employees

Business:

• Provides cable television, telephone and Internet services to about 79,000 homes and businesses in Deschutes, Jefferson and Crook counties, as of Dec. 31.

• U.S. Cellular — 4.8 million wireless customers in 23 states including Oregon

• TDS Telecommunications Corp. (TDS Telecom) — 1.1 million wireline, or telephone, and cable connections. Baja Broadband — Based in Alamogordo, N.M., Baja had about 150,000 total video, broadband and voice connections as of Dec. 31 in Arizona, Colorado, Nevada, New Mexico, Texas and Utah.

• OneNeck IT Solutions – Based in Scottsdale, Ariz., OneNeck owns and operates four data centers in Iowa, Minnesota, and Wisconsin, and manages two data centers in Arizona, and it offers a variety of computer and information technology services.